1. Marx and the Macroeconomy
How to draw and use Marxist
S & D diagrams.

2. What is the central driving force of a capitalist economy from the perspective of:
Keynes?

3. Supply-Side Economics?
What is the central driving force of a capitalist economy from the perspective of:
Keynes?
Supply-Side Economics?

4. Supply-Side Economics? Marx?
What is the central driving force of a capitalist economy from the perspective of:
Keynes?
Supply-Side Economics?
Marx?

5. Theoretical Prime Mover View of the System
Keynes

6. Theoretical Prime Mover View of the System
Keynes
Demand Moves the Economy

7. Theoretical Prime Mover View of the System
Keynes
Supply-Side
Demand Moves the Economy

8. Theoretical Prime Mover View of the System
Keynes
Supply-Side
Demand Moves the Economy
Supply Moves the Economy

9. Theoretical Prime Mover View of the System
Keynes
Supply-Side
Marx
Demand Moves the Economy
Supply Moves the Economy

10. Theoretical Prime Mover View of the System
Keynes
Supply-Side
Marx
Demand Moves the Economy
Supply Moves the Economy
Profits Move Demand and Supply

11. How will an increase in Investment Feed Through the Economy from a Keynesian View?

12. How will an increase in Investment Feed Through the Economy from a Keynesian View?
Investment Spending is Part of Aggregate Demand. When investors buy equipment, equipment producers see their inventories decline. How do producers respond?

13. How will an increase in Investment Feed Through the Economy from a Keynesian View?
Investment Spending is Part of Aggregate Demand. When investors buy equipment, equipment producers see their inventories decline. They respond by hiring more workers and buying more inputs, which sets off a chain reaction larger than the initial increase in equipment orders.

14. Draw this on an aggregate demand and supply diagram (P, D or y)
How will an increase in Investment Feed Through the Economy from a Keynesian View?
Investment Spending is Part of Aggregate Demand. When investors buy equipment, equipment producers see their inventories decline. They respond by hiring more workers and buying more inputs, which sets off a chain reaction larger than the initial increase in equipment orders.
Draw this on an aggregate demand and supply diagram (P, D or y)

15. Results: if I goes up during a recession, real GDP will rise without any inflation of Prices

16. Results: if I goes up when the economy is near the wall, real GDP and Prices will rise

17. How will an increase in Investment Feed Through the Economy from a Supply-Side View?

18. How will an increase in Investment Feed Through the Economy from a Supply-Side View?
How will an increase in investment affect the productive capacity of the economy?

19. How will an increase in Investment Feed Through the Economy from a Supply-Side View?
Investment in equipment and technology raises the productive capacity of the economy
Which way will an increase in productive capacity move the aggregate supply curve?

20. How will an increase in Investment Feed Through the Economy from a Supply-Side View?
Investment in equipment and technology raises the productive capacity of the economy, which moves the aggregate supply curve to the right

21. How will an increase in Investment Feed Through the Economy from a Supply-Side View?
Investment in equipment and technology raises the productive capacity of the economy, which moves the aggregate supply curve to the right
Draw the Supply-side view of an increase in investment spending on an aggregate demand and supply diagram (P on vertical axis, D or y on horizontal)

22. Supply-Side Economics : effects of an increase in investment
S before P
S after investment P1 P2 D y1 y2
D, y
Results: Investment in equipment and technology raises the productive capacity of the
economy, increasing total supply of goods. Inflation declines and real growth occurs.

23. What causes an increase in investment spending from a Marxist perspective?

24. What causes an increase in investment spending from a Marxist perspective?
Corporations are not welfare agents, producing to satisfy the needs of consumers. If demand were very high and a company cannot make a profit, will the company produce the product?

25. What causes an increase in investment spending from a Marxist perspective?
Corporations are not welfare agents, producing to satisfy the needs of consumers. If demand were very high and a company cannot make a profit, will the company produce the product?
When profitability conditions are healthy, investment spending rises

26. What causes an increase in investment spending from a Marxist perspective?
Corporations are not welfare agents, producing to satisfy the needs of consumers. If demand were very high and a company cannot make a profit, will the company produce the product?
When profitability conditions are healthy, investment spending rises
When profitability conditions sour, investment declines, even if there were high demand

27. If profits are healthy, corporations increase investment
If profits are healthy, corporations increase investment. How does this feed through the macroeconomy from a Marxist perspective?

28. If profits are healthy, corporations increase investment
If profits are healthy, corporations increase investment. How does this feed through the macroeconomy from a Marxist perspective?
Step 1. When corporations buy equipment, which side of the macroeconomy moves?

29. If profits are healthy, corporations increase investment
If profits are healthy, corporations increase investment. How does this feed through the macroeconomy from a Marxist perspective?
Step 1. When corporations buy equipment, which side of the macroeconomy moves?
Step 2. After the corporations have introduced the equipment into the assembly line, and all the snags have been worked out, what will happen to the availability of commodities for sale?

30. If profits are healthy, corporations increase investment
If profits are healthy, corporations increase investment. How does this feed through the macroeconomy from a Marxist perspective?
Step 1. When corporations buy equipment, which side of the macroeconomy moves?
Step 2. After the corporations have introduced the equipment into the assembly line, and all the snags have been worked out, what will happen to the availability of commodities for sale? Which side of the macroeconomy now moves?

31. Step 1. When corporations buy equipment, demand moves to the right.
If profits are healthy, corporations increase investment. How does this feed through the macroeconomy from a Marxist perspective?
Step 1. When corporations buy equipment, demand moves to the right.

32. Step 1. When corporations buy equipment, demand moves to the right.
If profits are healthy, corporations increase investment. How does this feed through the macroeconomy from a Marxist perspective?
Step 1. When corporations buy equipment, demand moves to the right.
Step 2. After the equipment is in place and running, more commodities will be available for sale. Supply moves to the right.

33. Step 1. When corporations buy equipment, demand moves to the right.
If profits are healthy, corporations increase investment. How does this feed through the macroeconomy from a Marxist perspective?
Step 1. When corporations buy equipment, demand moves to the right.
Step 2. After the equipment is in place and running, more commodities will be available for sale. Supply moves to the right.
Profits move demand and supply.

34. How do you draw a Marxist aggregate supply diagram?

35. How do you draw a Marxist aggregate supply diagram?
According to Marx, companies adjust both quantities
produced and prices

36. How do you draw a Marxist aggregate supply diagram?
Price Level
Aggregate Supply
and prices
Companies adjust both quantities produced
Quantities Supplied

37. How do you draw a Marxist Aggregate Demand Diagram?

38. A Marxist Aggregate Demand CurveP
As price
level
falls
Amount of stuff
bought rises
Aggregate Demand
Quantities Demanded
Note: All three theories agree on the shape of Aggregate Demand

39. Step 1: Companies buy more equipment
Marxist View of an Increase in Investment
Step 1: Companies buy more equipment S1 P D2 D1
D or y

40. How do you draw the effects of an increase in investment spending from a Marxist perspective?
Step 1 S2
Step 2 P2 P1 D2 D1 y1 y2
D or y
Result: investment increases lead to an expansion phase of the business cycle,
and this can occur without excessive inflation.

41. What if profits collapse?
Step 1.

42. What if profits collapse?
Step 1. From a Marxist perspective, companies will halt investment plans, stop buying raw materials and intermediate products, and lay off workers.

43. What if profits collapse?
Step 1. From a Marxist perspective, companies will halt investment plans, stop buying raw materials and intermediate products, and lay off workers.
These actions are on which side of the economy?

44. What if profits collapse?
Step 2. After the step 1 layoffs and reduced purchases of equipment, production inside factories declines and there are fewer commodities available for sale on the market.
What will happen in Step 2 to Supply?

45. From a Marxist perspective, what will happen if profits collapse?D1 D2 y2 y1
D or y
Result: investment spending will drop off quickly, layoffs occur, and with a
lag, supply of commodities will contract. Economy goes into recession.